Introduction
This course teaches the fundamentals of modern corporate and financial risk management and shows how to integrate environmental, sustainability and climate risks into these approaches in order to recognize, understand and manage these risks systematically. Modern corporate risk management starts from the premise that firms invest in projects with positive net present value (NPV) and entails the management of the risks associated with the portfolio of positive NPV investments. Based on this premise, the course develops tools that corporate risk managers have available to manage those risks. Since risk management is complex in practice, the course studies diffferent frameworks that provide pragmatic enterprise risk management implementation approaches.
To help identify the sustainability risks that affect the firm’s portfolio of investments, the students will need to conduct both inside‐out analyses (how the organization’s activities affect the external environment in which they operate) and outside‐in assessments (how external sustainability risks, e.g. climate change, affect the organization’s operations). As frameworks for theses analyses, the students will use the UN Sustainable Development Goals (SDGs), the Task force for Climate‐related Financial Disclosure (TCFD) Risk Management Guidance and EU Taxonomy Regulation (TR) classifications of sustainability enhancing or damaging economic activities and of the disclosures firms make either in response to these regulations, or voluntarily. In the process of integrating ESG risks in ERM, the students will need to deepen their understanding ESG impact measurement standards, materiality determination, ESG reporting frameworks.